Market abuse, fraud and misleading communications

The purpose of this paper is to analyse the nature and content of the laws relating to market abuse with a view to determining whether they only offer a civil law remedy for the State. The three categories of insider dealing as defined by the Criminal Justice Act 1993 clearly offer a criminal law based response, but as is shown here virtually all cases of market abuse can potentially be a basis for a criminal prosecution.

The methodology adopted is to consider the other relevant areas of law, namely the Fraud Act 2006, the law of conspiracy to defraud and the law relating to misleading communications under s.397 of the Financial Services and Markets Act 2000 and then to determine whether between them they cover all the areas of behaviour caught by the definitions of market abuse.

The consequences of this paper are that the Serious Fraud Office and the Financial Conduct Authority now have the option in almost any case of market abuse of considering whether a criminal or civil law approach is appropriate.

The approach adopted over the last two years by the prosecuting authorities of using the criminal law to a greater extent in serious cases of insider dealing can now be extended to market abuse generally where it is thought appropriate.